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Corporate Boards Are Glorified Thiefs

Updated on July 24, 2010

I have nothing against the rich. I should set that onto the table right off the bat. In fact, just the other day in my own comments on another hub I made reference to the expiring of the Bush tax cuts as sort of like throwing a boomerang like a ball. You keep on waiting for the ball to hit the rich guy, but it just comes back to hit you instead. There is nothing wrong with working hard and making it to the top, and having a reward for that. I am not condemning anyone for being successful. The problem that I have, is that I think the place where we are at in this current day has become more thievery than real, justifiable compensation for our top executives in this country.

I want you to consider one thing in particular which I will focus on, aside from CEO pay. That is, pensions. Pensions, of course, if you ask most people about what they impose on a company, it is that they obligate companies to provide lifetime benefits to their employees. It forces them to take care of their own in a sense. And this is seen as a terrible liability for the company. Pension plans cost companies enormous amounts of money. After all, they have to be managed and funded. That costs money. They have to earn certain returns in order to deal with the fact that the cost of living by the time the last penny will be paid to a pensioner will be greater. Some retiree benefits even include continuations of medical coverage, and this can be a costly line item as well for corporations.

Nowadays it's a difficult prospect to find a company that even offers a pension anymore. The last figure I've seen is that around approximately 18-20% of companies offer employees a traditional pension these days. Even in cases where traditional pensions are offered by companies, the benefits that will be paid out are not as good as they once were. Government agencies are, of course, the largest provider of pensions currently, but that topic is for another day.

In the case of corporate America, however, most CEO's still receive some sort of lifetime benefit which works out to be a very lucrative thing indeed. CEO's who make millions of dollars each and every year for their hard work, as we all know, will never earn enough money in their lifetimes to sock away a few extra bucks for retirement, and must be taken care of into their retirement. Of course you can see through to my sarcasm there, can you not?

Regular workers, on the other hand, will struggle to put away all they can in order to have perhaps a mediocre retirement at best.

I'm not suggesting that money should simply be given away for the sake of taking care of people. Pensions really are, in a way, a form of welfare, and companies are not in the business of providing that. However, it can be argued that in fact, the biggest welfare recipients in the corporate ranks are the CEO's and other top executives who receive very large salaries, bonuses, and pensions.

We have to attract talented, capable people to provide growth to our company, and ultimately to our shareholders. That's the age old argument to satisfy the masses that John Q. Executive is worth $20 million a year. Paul Hodgson, author of the book, "Building Value Through Compensation," remarked in 2006 to Michael Brush for MSN Money, that the average pension for CEO's who ran S&P 500 companies was $930,000 per year. By 2010 you can bet that number is higher. Pensions attract talent too, it would seem.

But how much talent is worth that much money? How can that much money for pay and compensation be justified when the average wage in this country for the rest of America is around $18.54 an hour, or roughly just under $40,000 per year? It is true that in an email conversation I had with John Torinus, chairman of Serigraph Inc. and a founder of BizStarts, who also writes a regular weekly business column for the Milwaukee Journal Sentinel, that not all CEO's are paid such enormous, multi-million dollar salaries, and that in fact, most CEO's are lucky to see even $1 million a year, even when you add in their bonuses. I'll concede that to a point. There's a lot more smaller companies out there than big ones. But it still gives me great pause to think that the CEO of McDonald's, for example, employs many people, is a very large corporation that takes in enormous dollar amounts in annual revenue, who also pays its employees very little, offers very little in benefits, and certainly do not offer a traditional pension plan. Yet in 2009, the CEO of McDonald's was paid $17.9 million and he also has a pension plan.

One side thought here. If you are working for one of the largest companies in America, heedless of your capacity, shouldn't you feel like you are working for one of the largest companies in America?

I'm not taking away from the fact that McDonald's stock and company has done phenomenally well throughout the recession. Its stock price only recently took a little dip as same store sales numbers disappointed even if overall sales were up. But how much is enough, I wonder? And if a guy making $17.9 million needs a pension, why on earth would the guy flipping the burgers for maybe $10 an hour not need one? I think it's an honest question.

CEO compensation has simply gone overboard if you ask me. And as for the talent? I think it's clear that that argument can be seriously debated. It's all of this talent that we pay so much for that nearly caused the world's economic collapse. And why aren't we suggesting that all jobs require someone who is talented and capable of performing it? Every job is important. Every job requires someone to fill it. Every job requires some knack.

I am not calling for someone to regulate CEO and executive compensation. But let's be honest with ourselves about what's going on when it comes to their pay. They, the top dogs, set the standard for the pay. They make the rules. They decide what is and what is not the right amount to attract the right talent. Shareholders don't have a say in that. Regular people don't have a say in that. It has nothing to do with what the market is willing to bear when it comes to CEO pay as Gary B. Smith, curator of and a regular guest on Fox News and Fox Business, said to me on Facebook. It has to with what the Boards of Directors of this country decide is right. And who are the boards? They are largely made up of other CEO's, former CEO's, and future CEO's.

Perhaps to call corporate boards thieves is a bit harsh, I'll admit. But should there be this widening gap between what the top gets and what the bottom gets? Should there be this blatant disregard and disrespect for the people who literally bust their ass at the bottom? If CEO's are the brains of the body, the workers are the heartbeat. You cannot live without either one. Why is a 3% pay raise at the bottom considered excellent, yet often times the CEO's receive compensation increases that are in the double digits percentage-wise. Skinner's $17.9 million salary, the CEO of McDonald's, was a 30% increase from the previous year. 30%!

I realize that if we brought most CEO compensation packages in our largest companies down to reality, it wouldn't add up to a major pay raise for the rest of America. There are a lot more of the rest of America than there are of them. But perhaps we could get down to a level of everyone respecting the other. The top should not be looking down at their employees and seeing them as bottom feeders, sucking the life out of their profits. And frankly I don't want to be at the bottom looking up at the CEO as a greedy jerk who talks cost cutting every minute of the day, except when it applies to what he'll be paid or what he thinks he deserves to be paid.

Do you think that CEO's compensation is determined using reasonable guidelines?

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Do you think shareholders should be able to have a say in CEO compensation packages?

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    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      I don't believe the two are one in the same. There is a more direct correlation to what revenues are acquired by their presense than what a CEO draws. We don't buy a product because of who the CEO is. But we DO go to a game to watch a player or go to a movie to watch an actor.

      Maybe it's apples to oranges. Maybe it's apples to apples. I just think there's a difference in the dynamic of the two.

    • drcrischasse profile image

      Cristopher Chasse 

      9 years ago from Boston

      We could debate this one for ever. Its ok to pay Julia Roberts 25 million a picture or A-rod to play ball, however we don't pay our CEO's? While I agree about abuses a contract is a contract.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      Dreamreachout, the one good thing is that in the last five or so years nearly every proxy I receive to vote my shares includes a shareholder proposal to have a say in executive compensation—its something that will hopefully continue to build steam. When the CEO's take these exorbitant paychecks they are stealing from me, the shareholder, as well as the rest of the people who work hard for the company.

      Carolina, I wouldn't go quite that far. But certainly we need to inject sensibility into the matter of compensation as it applies to everyone in the company, and especially the top echelon. Besides, something the top often seems to miss is that undercutting the bottom actually hurts profits in the end. When workers feel slighted they don't work as hard. They don't watch quality as well as you might wish them to. That hurts productivity, lowers capacity, and I think lowers profits.

      In a way it's sort of the same concept as I apply it to the rent I charge. I can either give the renter more of what he wants in what I charge for the rent, and KEEP the building rented, or I can have a high vacancy rate. A high vacancy rate, in the end, will cost me far more in the long term than the discount I might provide in the short term. If you pay employees more, and make it easier for them to take care of their families, the added cost to employ them will be value added in the better performance they will provide you on the job, higher efficiencies, and a better and concerned eye to quality. If they are succeeding WITH the company, they'll want to keep the company successful. If they only see the CEO succeeding, they'll not be as interested in what happens to the company.

      Habee, moi? Sarcastic? Where would you ever get such a thought? ;)

    • habee profile image

      Holle Abee 

      9 years ago from Georgia

      I love your sarcasm. I think shareholders should def have a big say!

    • carolina muscle profile image

      carolina muscle 

      9 years ago from Charlotte, North Carolina

      I'd love to see the whole concept of corporations be dissolved.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      Billy, for a brief time I worked for a box company, Smurfit-Stone, who just weeks before they filed for bankruptcy paid themselves millions of dollars in bonuses. Again. It's not about talent as Tom Hellert said, and that I hear a LOT of people argue. It's about having access to the till, and cleaning it out. Like I said, I have nothing against paying for talent (I think Mullaly at Ford, for example, is doing a wonderful job). I just don't think that EVERYONE is automatically talented and deserves millions. And certainly if the company's books are wheezing, CEO's should not be getting millions of dollars at all. Their pay should be on the chopping block just as quickly as Joe Blow Production Man's pay is. Instead, the more jobs that get tossed out with the garbage, the more bonuses the CEO gets. "You saved us great money Mr. Exec. You're a genious."

      No you're not. You've taken the easiest way out. A gorilla could make such a simple decision like that. Wow, rocket science. No employees, less cost. That's worth every penny isn't it?

      Come on.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      HappyHer, I'm absolutely for shareholders voting for compensation packages. In fact, I strongly support that. But I do also understand that the majority shareholders will still likely be the top executives and folks who serve on the board of directors. I also think that ALL employees who work for companies, especially publicly traded ones, should be paid part in cash and part in stock. In that way, employees not only have a piece of the pie, an incentive to help the company succeed, but they also then have a voice as well in the process. It's better than a union.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      Hello, always happy to be enlightening. :)

      Tom, I think the argument of "getting the best guy" is simply an excuse to offer exorbitant compensation packages. Do you really believe that these packages are talent based? When Bob Nardelli royally killed his stock as CEO of Home Depot, he was basically fired, and paid over $100 million in a golden parachute. He was so talented he failed, and then was paid to fail. He was so talented, that as CEO of Chrysler he failed again and was fired again. Yet paid millions in the process. And what about the bankers at Lehmann Brothers? AIG? Citibank? How about the folks at Fannie and Freddie? General Motors? Speaking of Chrysler, how many times has IT failed? How many times have the airlines gone bankrupt? How about CEO Tony Hayward? How well did he do? Worldcom comes to mind and so does Enron.

      I should point out that if one is going to make the argument that talent is something you must pay for, talent is everywhere and in every job, although the only place where it seems it's considered important enough to pay for is at the top.

      I personally think the argument is totally moot. At the top bad behavior and poor work is rewarded to the tune of millions of dollars each and every year. At the bottom it is not tolerated at all, and certainly NEVER paid for. And if you ARE at the bottom and you're out of work because you screwed up, you can bet the company will fight tooth and nail to deny unemployment benefits.

    • profile image


      9 years ago

      There is a difference between luxurious living and wayward living!! With the kind of money that the corporate bosses get it is just the platform to lead a wayward life!! Their hard work???? They brought the world to being nearly extinct with their policies and plannings!! We are still struggling to get out of the recession!!

      Mate, this problem is not only in America but all over the World including here in India!!

      I appreciate this wonderful hub!! Cheers!!

    • billyaustindillon profile image


      9 years ago

      As always you get the discussion going - another great hub! The thieves is so apt - I remember with United Airlines -- they forced the pilots to take less, the unions to take less and there was a profit what do you think those greedy bastards in management and the CEO did????? Paid themselves a huge bonus. Disgraceful and what is worse TBTB stood by and let them

    • HappyHer profile image

      Tracy Morrow 

      9 years ago from Cleveland, OH

      I think there should be standardization in how corporate board members are paid. But that would probably be governed by the majority stock holders, who are probably on the corporate board.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      Pamela, so long as companies continue to pay CEOs huge salaries, bonuses, stock options and non-contributory pensions—which many are—while employees get a paycheck and nothing more, I will be for full retirement packages for employees. It would take 1 year working as a CEO to earn the equivalent of 5-10 times the average person's life savings. How those pensions are administered, I think, is what the real question is as it relates to cost. Part of the reason we pay these guys such big bucks is because they are "experts" in the art of making money, and that's supposed to translate into better profits for shareholders. So, if they are such "experts" at cutting costs and making money, why would managing a simple pension plan be so difficult? Think about it. Cutting the employees is just the simplest way to take from Peter (the worker) to pay Paul (the shareholders and executives).

      Amillar, reciprocity is a good choice of word. The workers are the heartbeat. They are the sweat that generates the real revenue and who execute the ideas. They deserve more than someone telling them, "just be happy you got a job and shut up." A little thanks is all the average worker is looking for. The CEO is set up for life immediately. The worker will have to build that set up on his own for a lifetime.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      Tom, mainly because while CEO's often sit on boards, ultimately the CEO does not decide his compensation. That is determined by the compesantion committees of the board of directors.

      Sheri, I am definitely one who is FOR retirement benefits for all if there are going to be retirement benefits for anyone. Still, I find a CEO pension to be frivolous and unnecessary, and if I ever were to be a CEO I would not accept one.

    • tom hellert profile image

      tom hellert 

      9 years ago from home


      If a person can get a deal, I am not opposed to them getting it, I believe they should be able to get what they can when they can. The problem is that companies feel obligated to offer these benefits to attract qualified people-If companies stopped offering it, quite the catch 22 of parachites- Will you get the best person without the perks or can you bump up the salary to make up for it but will you get the best person? quite a canundrum eh hspring ...I say get someone who can do the job but does not expect the world.....


    • Hello, hello, profile image

      Hello, hello, 

      9 years ago from London, UK

      Thank you for your an eye-opener. Thank you fro a great hub.

    • amillar profile image


      9 years ago from Scotland, UK

      I think it's a question of getting a fair balance. A word I've learned recently is 'reciprocity'. That's surely better than rapacity - which I've known about for a long time. Another thing is, when pensioners don’t have money to spend, that money goes out of the homeland economy, and into tax havens. This is an excellent hub, I’m glad I follow.

    • Pamela99 profile image

      Pamela Oglesby 

      9 years ago from Sunny Florida

      I think you make some good points in your article. I also think there several big companies that are bad examples of what you describe but I don't think they are all that way.

      My husband, I and our children have always contributed to a 401K with some matching funds from the companies. Now if you are talking about getting a full pension package without contributing anything yourself because I don't think it should be that way. I think some percentage of matching contributions is fair and you choose where you want that money invested.

    • SheriSapp profile image


      9 years ago from West Virginia

      Really thought-provoking hub here. I like the way you explained your point. As a teacher, I and my employer BOTH pay into a retirement account. I have NO ILLUSION whatsoever about relying on social security as I am currently only 40 and a LONG way from retirement. The money taken from my current pay and put into my retirement acct is not missed as it has always been deducted beofre I receive my check. Anyway, good work!!

    • Tom Whitworth profile image

      Tom Whitworth 

      9 years ago from Moundsville, WV


      I agree with everything you said in your hub, but why the title, "Corporate Boards Are Glorified Thiefs."? It would seem you are talking about CEO's not boards.

    • Springboard profile imageAUTHOR


      9 years ago from Wisconsin

      A guy I chat with on Facebook, Adam DePaolo, commented "I believe the solution is to celebrate and support companies that are consumer, employee and shareholder friendly." I think it's a great way to go, if you can. The unfortunate reality is that there aren't many of those kinds of companies that meet all three of those criteria. He doesn't think that shareholder voting would change much because the majority of shares would still be held at the top—which is likely true. So, maybe ALL companies that are publicly traded should begin offering shares in the company to all employees as part of their compensation. Eventually the employees will at least have a stronger voice. Better than unionization if you ask me.

      Ah well, in a perfect world...

    • ltfawkes profile image


      9 years ago from NE Ohio

      Your two poll questions get right to the source of the problem - the shareholders are denied a right to vote and the boards and executives cross-pollinate. Yay! $$$ for everyone!



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